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Former Barclays bosses hid £322m in Qatar fees in 2008, court told

Four former Barclays executives conspired
to commit fraud by hiding £322 million of payments to Qatar in return
for cash injections in 2008, a prosecutor alleged at the opening of one
of London’s most high-profile criminal trials.
Former chief executive John Varley and three former directors are the
most senior bankers to be prosecuted in Britain over events during the
financial crisis, when Barclays avoided a state bailout by raising more
than £11 billion from mainly Gulf investors in two cash calls.
Opening the case for the Serious Fraud Office prosecutor, senior lawyer
Edward Brown alleged that the bank’s Advisory Service Agreements (ASAs),
through which Qatar was paid £322 million ($419.66 million) in 2008,
were a “dishonest mechanism” to conceal extra fees from other investors
and the wider market.
“It is the hiding of these additional commission fees which lies at the
heart of this case...,” he told the jury at London’s Southwark Crown
Court in a courtroom so packed that reporters had to request tickets to
gain entry.
“(The ASAs) were devised by the conspirators as mechanism for paying the
Qataris greater fees than those paid to other investors so as not to
reveal the true position ...,” Brown told the court in a trial scheduled
to last up to six months.
Varley, 62, in an open-necked shirt and jumper, listened in the
glass-surrounded dock, flanked by Roger Jenkins, in a polo neck jumper
and jacket, Tom Kalaris and Richard Boath, both wearing suits.
They are charged with conspiracy to commit fraud by false
representation. Varley and Jenkins face two counts and Kalaris and Boath
face one. They all deny the charges.
Varley and Jenkins, the 63-year-old former head of Barclays’ Middle
Eastern arm, are charged with two counts of conspiring dishonestly with
former finance director Christopher Lucas to make misleading or untrue
representations in documents published in relation to both the June and
October capital raisings.
Kalaris, 63, who ran Barclays’ wealth management business, and Boath, a
60-year-old former head of the corporate finance division, face one
count over the June 2008 cash call. Both charges allege the men were
either seeking to profit or to cause or expose others to losses.
Lucas, who is suffering from ill-health, has not been charged.
The case hinges on what the bank disclosed in its public statements in
2008; the prospectuses for the capital raisings and subscription
agreement documents published that June and October, which outlined fees
and commissions paid to investors in return for backing the bank.
Prosecutors allege that Barclays thought it essential to secure a deal
with Qatar in early 2008 as markets roiled, but that the Gulf state
drove a hard bargain.
Qatar initially demanded a fee of 3.75 percent before settling on 3.25
percent in return for investing in the bank — more than double what
Barclays was paying other investors, the prosecution alleged.
Unwilling to risk other investors demanding the same terms — or
appearing financially unstable by being seen to pay too high a price —
the executives played a part in false representations to the market, the
prosecution alleged.
Brown said some defendants relied on the fact that lawyers had
sanctioned the use of ASAs by signing off on them, as their defense in
the case. But he alleged lawyers were told the ASAs were genuinely
designed to represent services provided by Qatar and that they were
separate from the Qatari investment in Barclays.
“The truth is that the lawyers did not approve of the use of the ASAs as
mechanisms to hide the commission fees paid to the Qataris,” he said.
Qatar, which has not been accused of wrongdoing, plowed around £4 billion into Barclays in 2008, Brown said.
The trial continues this week.